How a Harvard undergrad transformed the humble freshman facebook Into a profitable social network.

By Om Malik

June 1, 2005

(Business 2.0) – MySpace isn't the only startup to turn a Gen Y-based network into a moneymaking business. Mark Zuckerberg, a computer science major at Harvard, last year created a Web version of the freshman facebook--those student directories that serve as dating aids on campuses everywhere. Since it launched in February 2004, Zuckerberg's website, Thefacebook.com, has become a beehive for more than 2 million students at 430 colleges.

Why? The site is as sticky as MySpace: Students love viewing profiles of fellow students and finding far-flung friends at other universities. They're also using the site to sell textbooks or find roommates. Thefacebook has far fewer members than MySpace or Friendster, but it already ranks third among social-networking hubs in terms of monthly visitors--4.1 million in March, according to ComScore Media Metrix, compared with Friendster's 975,000. (MySpace led the pack with more than 11 million.)

That's why national advertisers like Victoria's Secret and Paramount are buying banner ads at Thefacebook. The site also generates revenue with localized ads for specific schools and classified ads placed by students selling books or sending birthday greetings. Zuckerberg won't disclose revenue figures, but other company executives say the site is already profitable. In April, Thefacebook landed $12 million in funding from Accel Partners, one of Silicon Valley's premier venture capital firms.

"What makes it so much better than Friendster is that it's your peers rather than a random assortment of people," says Sarah Williams, a freshman at Berklee School of Music in Boston who finds gigs through the site. And, of course, the network functions as a handy reference tool for cross-campus hookups. The ability to check out a profile of that cute girl in your psych class before asking her out? To many students, that's a service worth paying for.

For Zuckerberg, it's a job that justifies ditching class. In March he dropped out of Harvard to become Thefacebook's full-time CEO. --OM MALIK